Key Takeaways

  • The United States Securities and Exchange Commission announced a settlement against chip manufacturing company Nvidia Corporation, on May 6, 2022, for inadequate disclosures concerning the impact of cryptocurrency mining on the company’s gaming business.
  • The SEC fined Nvidia US$5.5 million, alleging that in back-to-back quarters in fiscal year 2018, Nvidia failed to disclose that cryptocurrency mining was a “significant element” of its revenue growth from sales of chips designed for gaming. The SEC alleged that Nvidia knew that the increased sales were, in significant part, driven by cryptocurrency mining.
  • The SEC focused on the potential harm to investors from the company’s alleged decision to withhold information that would have clearly pointed to cryptocurrency mining as the driving force behind the surge in gaming revenue.
  • Nvidia’s settlement should serve as a warning to public companies that regulators are keenly focused on disclosures related to cryptocurrency markets. Reporting companies whose business activities are impacted by cryptocurrency markets or who engage in practices that help increase cryptocurrency’s availability, such as cryptocurrency mining, yield farming, and staking, should ensure that they identify and properly disclose all material risks to and impacts on their operations.


The recent boom in cryptocurrency markets has corresponded with increased demand for semiconductors since cryptocurrency mining—the process of obtaining cryptocurrency rewards in exchange for verifying transactions on distributed ledgers—requires substantial computing power. Nvidia Corporation designs and markets graphics processing units (“GPUs”) for use in gaming, but those GPUs may also be used to provide the computations necessary for mining on certain cryptocurrency networks. Nvidia is one of the two leading GPU manufacturers whose products are commonly used for cryptocurrency mining.

In a May 6, 2022 cease and desist order, the Securities and Exchange Commission announced that Nvidia would pay US$5.5 million to settle charges that it unlawfully obscured the amount of its sales dependent on cryptocurrency miners. Nvidia did not admit or deny the allegations.

The SEC’s Allegations

The allegations stem from Nvidia’s disclosures during two consecutive quarters in fiscal year 2018, during which time Nvidia’s GPUs became increasingly popular for mining cryptocurrencies such as ether and Zcash. As demand for cryptocurrencies rose in 2017, Nvidia customers increasingly used the gaming GPUs for cryptocurrency mining. Nvidia subsequently launched a product line of GPUs specifically for cryptocurrency mining, known as “CMPs” and marketed them to large mining operations.

This increased demand for Nvidia’s gaming GPUs contributed to a significant increase in Nvidia’s revenues in fiscal year 2018. Nvidia’s gaming revenue—which is how it reports its GPU sales—increased by 52%, year-over-year for the second fiscal quarter 2018, and by 25% year-over-year for the third fiscal quarter 2018.

According to the SEC, during this time, Nvidia “had information indicating that cryptomining was a significant factor in the year-over-year growth in revenue for the company’s GPUs for [g]aming in its GPU business segment during the relevant period.” In addition, Nvidia’s analysts and investors routinely asked senior management about the extent to which cryptocurrency mining drove increases in gaming revenue.

However, per the SEC, the company did not sufficiently disclose the role of cryptocurrency mining in its gaming revenue figures for these quarters. This in turn, allegedly gave the misleading impression that these figures reflected reliable future growth, when in fact they were supposedly due to demand stemming from the volatile cryptocurrency market. According to the SEC, those omissions “deprived investors of critical information to evaluate the company’s business in a key market.”

Nvidia did disclose how cryptocurrency mining was affecting other segments of its business. The company identified cryptocurrency mining as a massive element of the OEM GPU sales within the GPU reportable segment revenue in its quarterly reports, which the SEC alleged created the impression that the company’s gaming business was not significantly affected by cryptocurrency mining.

The Nvidia investigation was conducted by an SEC unit responsible for protecting investors in the cryptocurrency markets and from cyber-related threats, which has recently nearly doubled in size.1

As the Nvidia settlement shows, reporting companies whose products, services, or business activities are impacted by cryptocurrency markets should ensure that they identify and properly disclose all material risks to and impacts on their operations in their applicable SEC filings.

Related SEC Guidance

The SEC has consistently expressed the view that cryptocurrency arrangements pose significant legal, technological and regulatory risks, all of which regulators claim can significantly impact an entity’s operations and financial condition. For example, in late March 2022,2 the SEC issued guidance stating that there are “significant” technological, legal, and regulatory risks associated with safeguarding cryptocurrency and, as a result, cryptocurrency should be reflected as a liability on companies’ balance sheets.

The SEC’s guidance and the Nvidia enforcement action signal that the SEC is paying close attention to disclosures regarding the risks associated with cryptocurrency, particularly as cryptocurrency is becoming more widely held. The Nvidia case is an important example of the ways in which cryptocurrencies are affecting the operations of a growing number of businesses, and the new risks that reporting companies must consider when analyzing their business and disclosure obligations.